Wednesday, September 14, 2011

Simple Math

Some people where I live wonder why the "doings" at Cobb EMC are so important to my fellow Washington EMC co-op members and Washington County tax payers. Cobb EMC is the lead partner in a group of EMCs who want to build a coal fired power plant about 8 miles from my house and 8 miles west of my family's timber farm.

Some of the Cobb co-op members have reviewed a just released audit which reveals stunning losses to the co-op. The Cobb EMC Owner's Association (CEOA) site includes the following on the costs of delays in liquidating Allied Utility Network and Allied Energy Services, the company which received a no-bid contract to build Plant Washington in my front yard. The CEO site includes this:

UPDATE: According to the 2011 Audit Report, Allied Utility Network ceased operations in October of last year and was dissolved – apparently with no disposition of assets. The company had never been profitable. Its only earnings had come from services provided within Cobb Energy or its affiliates. From 2002 to 2008, it had earned $20.8 million with operating expenses of $26.5 million. Cobb EMC, of course, subsidized the loss through service fees and other charges billed by Cobb Energy.The report also states that Alford’s Allied Energy Services was sold just one month ago on August 9th, for the whopping sum of $128,256. Quite a bargain for the company selected by Power4Georgians to develop two multi-billion-dollar coal plants. Perhaps that’s because it, like Allied Utility Network, had never been profitable — at least not for Cobb Energy. From its creation in 2004 through the end of 2007, it had spent $5 million to bring in revenues totaling only $704,000 — a loss of $4.3 million.Finally, we are able to see from the report that Rayder’s and the Board’s foot-dragging was costly, because subsidiaries held in the liquidating trust appear to have continued to operate at a losscancelling out all the gains from disposition of their assets and costing the co-op an additional three quarters of a million dollars:
2008-09 Report: Net loss of $662,367
2009-10 Report: Net gain of $1,964,044
2010-11 Report: Net loss of $2,061,824
Total: Net loss of $760,147
That's a lot of member dollars for the Board to lose while receiving thousands each year in compensation.
When Dwight Brown announced the creation of Cobb Energy in 1997,  the Atlanta Journal Constitution reported that Brown promised members, “We will not allow Cobb EMC to subsidize this new company,” he said. "We make this pledge that Cobb Electric Membership Corporation will not subsidize this other company, and this other company is created to work for you and to work for Cobb Electric Membership Corporation.”

That promise never held water. The AJC reported that the Cobb EMC Board also loaned Brown $3M, and then forgave the loan. Brown used that money to purchase shares of Cobb Energy (Brown and his wife received close to $2M in six years time until the agreement was legally shut down). Since Cobb Energy was announced, the non-profit co-op's expenses have soared and member dollars have been funneled into subsidiaries which have lost millions. The co-op has also spent an estimated $10M+ in legal costs since Cobb Energy was created. And much of that involves legal fights against the very members they are supposed to serve.

Over 3.5 years ago my EMC got in bed with Cobb EMC (and seven other co-ops, four of whom got out of the bed over 2 years). But now we are beginning to know just how deep the problems at Cobb run. All this dirty laundry should raise some serious questions for me and my fellow co-op members about our business partners.

We may be a little rural community and we really do know where folks are going without using their blinker.  But that doesn't make us stupid. Understanding the management and financial problems surrounding Cobb EMC, their indicted former CEO, and their Board, doesn't require higher math skills, a degree in accounting, or an MBA. A little old fashioned country figurin' makes it pretty clear: we don't do business like Cobb EMC, and we would be better off to get out of that bed now.      

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